GreenSage E-zine 05/2009

Warren Buffett Company Debuts Line of Green Prefab Homes
Courtesy Jason Pelletier and Robert Norris

Warren Buffett has an unsurpassed knack for picking good companies in strong industries at the right price. Most things he’s touched have turned into gold. So it’s exciting to see that a Berkshire Hathaway subsidiary called Clayton Homes has just launched a line of green prefab homes (called the i-house) that start at under $75,000. That's about $105 / square foot excluding site costs and shipping.

Clayton Homes is one of the largest manufactured housing companies in the world, having produced over 1.5 million units since 1934. They’ll clearly get the manufacturing, financing and logistics right, but can they deliver the amenities, materials and compelling designs that prospective green homeowners have come to expect from green prefab?

The first models are quite promising. Even the base version comes with a lengthy list of standard green features, including:
•Well insulated exterior walls, floor and roof (R-21, R-30 and R-30 respectively);
•Andersen low-e windows;
•Metal roof designed for rainwater collection;
•No-VOC paint;
•High efficiency heat pump;
•Dual-flush toilets.
•Low-flow faucets

If that’s not green enough for you, then you can pick from a long list of sustainable options that includes:
•Two to four kilowatts of solar PV panels;
•Bamboo flooring;
•Tankless hot water heaters;
•Energy Star appliances.

You may not get a LEED Platinum rating on your new i-house, but you will get a very low-energy and reasonably green home at a great price point.

Clayton Homes has embarked on a venture to establish the ultimate household brand name — the i-house. It could prove to be a pioneering leap into the future not only for Clayton Homes but for the entire U.S. housing market.

"All of housing is in dire straits right now. Here we are creating a whole other type and form of home that will appeal to, I think, a large audience," said Kevin Clayton, CEO and president.

Just how different and how appealing? The 1,000-square-foot prototype model is projected to have energy costs of $68 per month -- $26 when equipped with optional solar panels.

"There's unbelievable energy efficiency numbers on this house," Clayton said. "People love that."

And Clayton loves the "i" as a symbol. It's associated with intelligent, intuitive, inspired, innovative and integrated. "We just like being associated with Apple in any way we can," Clayton said as he slipped an iPhone from his pocket.

Tripled R&D spending
"I was listening to Steve Jobs not long ago, talking about his company, Apple Computer, and he was talking about the last two times his company was losing massive amounts of money. He fixed the company the same way both times, he tripled R&D spending.

"The guts that took -- so we built one home and we tripled our R&D spending," Clayton said, chuckling at the audacity of spending money to move forward when others are pulling back.

"Now that we're the leader in housing, you'll see a lot more of this from us, because we've got to be on the "i" -- innovation."

There is a significant difference between the Clayton Homes research-and-development model and Apple's, noted Chris Nicely, vice president of marketing for Clayton Homes: "Unlike Apple, we didn't wait (for the company to falter), and we're not losing money to innovate. We're making money and innovating at the same time."

Not only is the i-house designed to be energy efficient, it also is environmentally friendly. Clayton said that virtually all of the home's building materials are recyclable and green features dominate the i-house's construction.

Family inspiration
Clayton credits the home front for his green inspiration. About a year ago, his wife, Chelly, and their 5-year-old daughter, Ella, got on his case for putting plastic in the wrong recycling bin. An environmentalist entrepreneur was born.

"It took off from there," he said. "It's the right thing to do."

So Clayton Homes team members started kicking around ideas. And then another revelation. Ideas are fine, but there would be no progress unless the company committed to building a prototype home. He handed the project to two "amazing" architects at Clayton Homes, Wes Boyd and Andy Hutsell.

"So they started lobbing out these ideas to me, and quite frankly at first I thought, this is crazy. What are we getting ourselves into?

"Then the more I started listening to them and getting some others' input, it occurred to me I need to get out of their way, turn 'em loose, free reign, and ultimately no budget constraint -- and let them push the envelope on design and energy efficiency and they were rollin'."

Then it was a matter of which manufacturing facility would step up to build the i-house. The Bean Station plant committed to the prototype project and took about 90 days to construct it using top-of-the line materials and state-of-the-art appliances.

"There's nothing I see that they could have done better. The fit and finish, I would put it up against any custom-home builder at five times the pricing," Clayton said.

No price yet
Price of the i-house is yet to be determined. "If you asked how much the first iPhone cost that (Apple) built, it'd be pretty expensive. But what they recognized is that, if they could do it at $199, they could capture a lot of the audience, and that's what we're doing," Clayton said.

So he is listening to the hundreds of retailers and suppliers who have been previewing the i-house to get ideas on how to make it affordable. He is convinced Clayton Homes can get it done.

"We're now building over 25,000 homes annually, the largest home builder. We can do this efficiently. No one has the ability to build it on a large scale and to get it as affordable as we do. There's no more efficient building method going than modular construction."

So Clayton will analyze the input from home-supply and home-selling specialists and from the public. Team members will tweak the i-house design, modify it to suit various needs and specific areas of the country, offer optional sizes and modular variations, and then put it on the market and sell thousands.

When?

"Soon," Clayton said.

He can't wait to hear customers utter the "i" word most cherished by entrepreneurs -- "i-buy."